When he joined the Hawaii Employees’ Retirement System (HIERS) in 2011 and
was selected to be its fourth CIO in 2012, Vijoy
Chattergy knew the only way to dig the fund out of
its bottom-quartile hole was to revamp its investment portfolio.

Chattergy, working with general consultant,
reviewed the fund’s portfolio, identified its weak-nesses, and eventually decided on a risk-manage-ment approach. After reaching its strategic target
allocations in 2013, HIERS’ consultant suggested
the fund adjust its portfolio to focus on functional
risk classes.

“I quickly came to realize that the idea of functional risk classes—and really having the transparency and flexibility into the portfolio—was critical
for the way we should be thinking about our portfolio construction and the way we should actually
evaluate opportunities,” Chattergy told CIO.

Around that time, Chattergy hired a five-person team of investment professionals. In 2014,
the fund for the first time added three investment officers (including a risk investment officer),
explored strategies to restructure the portfolio
according to the new initiative, and educated the
board, who greenlit the idea.

Initially, the functional risk classification
entailed dividing traditional fixed-income into
credit and principal protection allocations. After
more passive equity and private market commitments were made, the class was dubbed “private
growth.” Chattergy’s team continued the portfolio
adjustments until the five risk classes of which the
HIERS portfolio consists today (growth risk, principal protection, real return, crisis risk offset (CRO),
and opportunities) were attained.

In 2017, HIERS broke the real estate portfolio into non-core real estate and core real estate
classes, moving them into the stabilized growth and
private growth exposure categories. It also moved
the oversight of one of its emerging market-focused
infrastructure funds into the space. The fund is also
restructuring its credit exposure and examining
its venture exposure. In addition, HIERS implemented its CRO class in April. The class looks to
diversify growth risk via three separate strategies:
Treasury Duration Capture; Systematic Trend
Following; and Alternative Return Capture.

The addition of CRO necessitated hires and
terminations within the fund’s managerial ranks.
Additions include seven managers and a manager
who manages the overall CRO platform. On
April 4, 10% of the portfolio began to trade in
CRO. By 2020, HIERS plans to increase that
allocation to 20%.

Thanks to the transformed portfolio, the now
$16.5 billion fund saw 13.7% returns this year.

When it comes to innovation, Chattergy feels
that the key to extraordinary performance lies
in collaborating with asset managers as well as
like-minded investors. In addition to the HIERS
culture, the Hawaii local is also tethered to his role
not only because of dedication, but because friends
and family members are both retired and working
employees within the system.

“Even if I’m not sitting here in this seat, I know
that for decades to come, my family will benefit
from this pension plan,” Chattergy said. “It really
is a unique job for me because the alignment is so
strong with two generations of my family devoting
nearly 100 years of service to the state of Hawaii.”